World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Saturday, May 28, 2011

Friday, May 27, 2011

Equity futures are higher once again in the face of obviously weakening data. The dollar is lower of course, bonds are a little lower, oil is higher, gold & silver are higher, and food commodities are mixed.

Stocks have been in a downtrend for most of May, but it has been a mild decline, one that looks like a wave 4. That means we will likely see a fifth wave higher, and that could start at any time. There is a clear down channel, or descending wedge, and breaking the upper boundary will likely signal that fifth wave higher has begun. Below is a 30 minute chart of the SPX:

According to McHugh, this fifth wave may take us to new highs and it could put in a very long decades long top as can be seen in this decade long expanding megaphone top of the DOW:

Personal Income and Outlays were reported for April, matching expectations with consumer spending basically matching small increases in income, but neither keeping up with actual inflation as the squeeze continues due to the money for nothing policies of the magical and mystical all-knowing “Fed.” Here’s Econohope acting as if these numbers have any basis in reality – they don’t as any number made “real” by the “Fed” is vastly distorted to cover up their money debauching ways:

HighlightsIncome growth continued to support the consumer sector in April. Spending was moderately strong but largely due to higher prices. Notably, inflation is still on the warm side. As the report's biggest positive, personal income in April posted a 0.4 percent gain equaling the pace in March and matching analysts' forecast. Importantly, the key wages & salaries component increased 0.4 percent, following a boost of 0.3 percent in March.

Spending looks healthy at face value but inflation was the underlying factor for the most part. Personal consumption expenditures expanded at a 0.4 percent rise in April after increasing 0.5 percent the month before. The consensus expected a 0.4 percent gain. Providing upward lift was another sizeable increase in gasoline sales. But real spending has been soft recently, rising 0.1 percent in April and in March after a 0.4 percent jump in February.

Strength in nominal PCEs was largely in nondurables, up 0.8 percent after a 0.9 percent jump in March. Durables rebounded 0.3 percent, following a 0.7 percent drop the month before. Services spending slowed to a 0.2 percent increase after a 0.6 percent jump in March.

Energy is keeping overall inflation on the high side. The headline PCE price index posted a 0.3 percent gain, down marginally from 0.4 percent in March but still strong. However, the core rate firmed to 0.2 percent from 0.1 percent in March.

On a year-ago basis, headline PCE inflation worsened to 2.2 percent from 1.8 percent in March. Core PCE price inflation edged up to 1.0 percent on a year-ago basis from 0.9 percent in March. Core inflation has been on an uptrend since the recent year-ago low of 0.7 percent in December 2010.

Year on year, personal income growth for April posted at 4.4 percent, compared to 4.8 percent the prior month. PCEs growth rose a year-ago 4.8 percent, up from 4.4 percent the prior month.

The good news is that income growth remains moderately strong. The bad news is that inflation has eaten into those earnings and has restrained real spending. The slowing in real spending may be transitory (a recently favorite word among Fed officials) but softer inflation and healthier income growth are needed.

No, what’s needed is level prices to go along with level incomes that can support sustainable levels of debt. The only way to do that is to get rid of the private central banker's rob-your-productive-efforts, fraud based paradigm.

At least this piece from Bloomberg on the issue is a little bit closer to reality on the health of the “consumer:”

May 27 (Bloomberg) -- Consumer spending in the U.S. climbed less than forecast in April as food and fuel prices rose, a sign that faster income gains are necessary to boost the biggest part of the economy.

Retailers like Wal-Mart Stores Inc. are feeling the pinch as higher grocery and energy bills force households to cut back on less essential items. Federal Reserve Chairman Ben S. Bernanke is among central bankers who predict the acceleration in commodity prices will be temporary, providing some relief for Americans whose spending accounts for 70 percent of the economy.

“When you account for higher food and energy prices there’s barely anything left for consumers” to buy, said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who accurately forecast the April gain in spending. “We need to see job growth pick up and we need to see commodity prices continue to cool.”

“Consumer” Sentiment and Pending Home Sales will be released at 10 Eastern. We'll cover those inside today's Daily Thread, so please check back later for those.

I could yammer endlessly about the impossible math of Europe, but impossible is impossible and the people of Europe will continue to be led down the primrose path until they tell the central bankers to pound sand.

The suffering in Japan continues, three nuclear meltdowns, massive contamination and still Nero fiddles.

As long as the bankers are allowed to print, they will continue to spin reality into their own warped, marketing all the time, Prozac, Viagra, never ending debt, world of lost economic prosperity and environmental disasters. Just look at them yo-yo's...

Thursday, May 26, 2011

Equity futures were higher overnight but have fallen back on more negative economic data (remember, bad is good as long as we can print still more fluff… until it isn’t). The dollar is significantly lower, bonds are shooting higher, oil is down slightly as are gold & silver, while food commodities are mostly higher still.

Here’s the deal, Major Tom… Once macroeconomic debt saturation is reached, the more debt you pump into a system, the higher unemployment will go. All the money printing fluff in the world won’t create real jobs, in fact that will also destroy jobs in the long run as well if the total quantity of all money types are not kept under control.

And once again the Weekly Jobless Claims shoots higher, this time jumping back up to 424,000 with yet another revision higher to the previous week. This economy has not stopped shedding jobs, the nascent “recovery” was really no recovery, it was simply a money fluff façade. Here’s Econoday having a hard time making excuses – it’s obvious that that they, along with all the shills who surround this industry, don’t understand the underlying dynamics:

HighlightsWith no special factors to blame, initial jobless claims rose 10,000 in the May 21 week to a 424,000 level that's 20,000 higher than expected. Revision to the May 14 week is also a negative, up 5,000 to 414,000. The Labor Department isn't citing any weather or auto-related factors for the results. The four-week average of 438,500 is nearly 30,000 higher than a month ago in a comparison that points to trouble for the May employment report. Even the four-week average for continuing claims is higher, at 3.742 million in data for the May 14 week vs 3.702 million in mid April. Stock futures are moving off early gains following this report and following a softer-than-expected revision to first-quarter GDP.

The first revision of Q1 GDP also failed to live up to the fluff hype. The consensus was looking for a revision higher to 2.1% annualized growth rate, but it came in at a disappointing 1.8%. Again, this figure is completely distorted with debt, false deflator values, and other manipulations. Even taken at face value, “growth” here is far less than real inflation (again due to false deflator use) and thus it is my claim that real economic product is negative and still shrinking. Here’s Econoshill doing their best to pump you up:

HighlightsThe economy did not get the hoped for upgrade for the start of the year. The Commerce Department's second estimate for quarter GDP growth was unrevised at up 1.8 percent annualized and came in lower than the consensus forecast for 2.1 percent. The first quarter remains notably softer than the 3.1 percent pace in the fourth quarter.

Unfortunately, demand numbers were nudged down and inventory investment bumped up. Final sales of domestic product were revised to an annualized 0.6 percent from the initial estimate of 0.8 percent. Final sales to domestic purchasers were revised to 0.7 percent from the original estimate of 0.9 percent annualized. The downward revision to final sales was mainly in personal spending, now at up 2.2 percent instead of the initial 2.7 percent for the first quarter.

For overall relative strength (not merely the direction of revisions), PCEs growth remained moderately healthy. Also, business investment in equipment & software is strong. Inventory investment is positive but levels are still low. Weakness remained in government purchases, nonresidential structures, and net exports.

Economy-wide inflation was unrevised, with the GDP price index posting at 1.9 percent. The median forecast was for 1.9 percent.

Even though the headline number was disappointing, odds are that growth will not slow further in coming quarters. Momentum is still favorable for consumer spending, equipment investment, exports, and inventories.

Gee, I think I have to pull out my favorite word for all that gobbly-gook, OBFUSCATION. If you read something about the economy and it sounds like they are making up fancy words to try to make it sound good, then you are witnessing someone who either doesn’t actually understand real economic dynamics or it is an intentional effort to dazzle you with their bullshit. That is an example of both.

In the real economy, yesterday we found out that oil inventories built to a new record high while demand for gasoline is still falling.

Oil Inventories:

Also yesterday, the FHFA Home Price Index showed that home prices are still cratering, the year over year rate of crater is increasing, coming in at -5.8%. Various things are being blamed for the falling prices in the media, the latest being foreclosures. No, foreclosures are a sick and twisted symptom of banker asset stripping. The root of the problem is the fraudulent and still out of control bankers who created a huge fraud bubble in housing.

Take a look at the FHFA Home Price Index chart (the red line) and it is obvious that a new downtrend is in progress – call it a “double-dip” if that makes you happy, the truth is that it’s all part of the same fraud, the first dip is from the subprime fraud, and the second dip that’s occurring now is being driven by the Option-ARM scam. Compare the shape of the two charts below and I think the correlation is obvious – wave of subprime, wave of Option-Arm…

Note that there is about a four to nine month lag between the resetting maximum and the home price minimum. Taking that into the future, then, home prices MAY reach a low point sometime in the first half of 2012. Take that with a grain of salt, of course, as there are other threats to the economy, especially since it’s obvious that we’re nowhere near changing out WHO it is that controls the production of money.

Wednesday, May 25, 2011

Equity futures are a little lower prior to the open after being down considerably overnight – another “gift” from our “Fed” no doubt (eye roll). The dollar is slightly higher, bonds are close to even, oil is off slightly, silver & gold are close to even, and most food commodities are slightly higher.

The morally challenged Mortgage Banker’s Association reported that Purchase Applications rose by 1.5% in the past week, and that their Refinancing Index grew by .9%. What, no double digit swings? How reasonable of them. No, I don’t believe anything that comes from them, but know that purchase applications are still hovering near all-time modern lows that are less than half of what they were. Here’s Econoneverabadday:

HighlightsThe volume of mortgage applications for home purchases rose 1.5 percent in the May 20 week, partially reversing the prior week's 3.2 percent decline. Purchase applications jumped 6.7 percent in the first week of May, a month that so far looks to show a gain compared with April in what would be good news for the housing sector. Applications for refinancing rose 1.5 percent reflecting favorable mortgage rates which however rose in the week, up nine basis points for 30-year loans to 4.69 percent.

If May isn’t better than April, then you know how messed up it is. Most of the housing data has been weak, New Home Sales was the exception. Remember, massive Option-ARM loans are resetting and that will pressure upper end homes.

Yesterday the Richmond “Fed” Manufacturing Index took a header in May, falling from a positive reading of 10 all the way to negative 6. That shows outright contraction according to them, not just a slowing of growth.

This morning Durable Goods Orders also took a header, falling from the prior 2.5% gain to a 3.6% loss month over month. This is the largest drop in the past six months, and the declines were widespread. Remember, orders are measured in dollars, not units, so to have a contraction of that magnitude at the same time that we’re still throwing out billions in QE every day says a ton about how powerful the underlying forces of deflation are.

More and more data points are showing contraction. Any slowing in the devaluing of our money will allow the deflationary forces to show. Those forces are always present since our economy is debt saturated, printing money simply masks them. Slow the printing, or even indicate that it may slow in the future and those deflationary forces will express themselves.

Of course it is the reaction to the debt saturation that causes greater inflation. And with daily doses of freshly printed debauched dollars, the stock market is artificially kept from seeking a realistic level. This creates bizarre phenomena like an IPO valuation of 1,000+… there is simply too much “liquidity” sloshing around in the criminal central banker hands. Of course they tell you that the problems here and in Europe are one of “liquidity,” but that is complete nonsense, the real problem is insolvency because macro incomes cannot possibly handle more debt. Income to debt is what matters, debt to GDP is a Red Herring argument designed to distract, confuse, and confound. It’s all mixed up…

New Home Sales and the Richmond “Fed” data will be released at 10 Eastern and we’ll cover those inside our daily thread, please check back.

Gee, I guess all those Eurozone debt concerns magically were cured overnight… Barely making the headlines, the bombing of Tripoli continues. We’re still neck deep in Afghanistan. Rumor mongering about Pakistan and their nuclear weapons continues, and bombs galore continue to kill in Iraq. Severe weather in the U.S. continues, and another Iceland volcano blows its top spewing ash towards the debt saturated Europe. More and more people are finally acknowledging complete meltdown in all three Fukushima reactors, duh. And the radiation levels in Tokyo are severe in spots as the contamination continues to migrate – still no acknowledgement of what must really be done in order to contain it.

In other words, nothing new in the big picture, just another complete capture/ manipulate your wealth away day…

Yesterday's action threw the major indices below the bottom Bollingers and some below their 50dma's. The XLF closed a perfect outside inverted hammer below the bottom Bollinger band and right on top of the 200dma. This is a classic reversal set up I showed yesterday, and sure enough it appears it will open higher today:

Note that the XLF and RUT both produced new closing lows below the April lows, but as of yet the other fluff indices have not.

Monday, May 23, 2011

Equity futures are tumbling again this morning, with the dollar higher, euro lower, bonds higher, oil down sharply, gold & silver down only slightly, and most food commodities slightly lower as well.

The ongoing (never ending) debt crisis in Europe is garnering attention over the weekend. The debate about who’s worse off in the world still mindlessly rages while the vast majority fail to understand the root problems of debt saturation, how we got that way, and WHO is behind the monetary madness. No real progress can or will be made until we exit the central banker paradigm, stop arguing about “stimulus” versus austerity (false left vs. right argument), and get on with the job of creating a money system that works at the benefit of the entire population, not just a few self-anointed narcissists.

The stimulus/ austerity waves go back and forth and right now the market appears to be pricing in the possibility that austerity is next… again. At least that’s a mainstream take on things. My take is that the markets are 100% captured and none of it has meaning except in how we’re being manipulated context. Keep that in mind especially when you see a chart of the dollar – talk about squishy, there are more manipulations there than in Obama’s long form birth certificate! Still, the dollar is getting close to a down slopping area of overhead resistance just as the major indices are nearing the bottom of a downtrend line of the recent decline.

Below is a daily dollar chart showing this overhead. A break above that trendline may mean that equities and commodities are about to have a harder time, but a turn back down in the dollar may mean another rally leg higher:

Below you can see that this morning the DOW has slid to recent down slopping support on the 30 minute chart of the DOW futures:

Meanwhile the manipulated economic data can’t even be manipulated into positive territory anymore. The Chicago “Fed” National Activity Index fell from +.26 to -.45 in April with the three month moving average also falling negative. Here’s Econonotaclue:

HighlightsThe Chicago Fed national activity index fell to minus 0.45 in April for the lowest reading since August and down from March's revised plus 0.32. April shows a month-to-month decline in manufacturing-related indicators which the report attributes in part to Japanese-related shortages in the auto sector. The three-month moving average is minus 0.12 for the first negative reading since December. The average indicates that economic activity was below trend in the month though it also indicates that inflationary pressures were subdued.

Oh yeah, another wave of austerity and the pulling of liquidity will subdue inflationary pressures all right… oh, for about a month maybe until the “Fed” can’t stand the heat and then the justification for QEinfinity rolls out. Waves of deflation and inflation, but the overall trend will be inflation until we create a system that is not built around the need for inflation. The only way to do that is to end the process of financing national debts with the private banks via the bond and treasury market and to create a system like Freedom’s Vision that ensures that overall price inflation targets ZERO (the ONLY inflation target that makes any sense).

This week we’ll get several housing market data points, and we’ll get version 2 of Q1 GDP. The consensus is that it will be revised higher to 2.1% - I say only in the “Fed’s” money printing dollar debauched fantasy world is that true.

In the real world, attempts at never-ending growth always hit limits. Drill and spill in the Gulf, build nuclear reactors right on the shoreline in an earthquake/ tsunami zone. Those are the types of things done when we are pushing the boundaries of our knowledge – I happen to think boundaries need to be pushed, but when we’re talking about such important things we need to push with care and oversight. When special interests rule politics, oversight is out the window.

In Arnie Gunderson’s latest update he discusses the implications of the Fukushima disaster on our existing reactors and has clear thoughts on weak areas that need to be addressed. My take is that they won’t truly be addressed and new disasters will continue to happen until we get our money system and our politics back into the hands of the people. Here’s Arnie: